IBM Changes 401(k) Matches, Workers Fume"The net effect of the change: Some employees could receive a smaller contribution from IBM into their retirement accounts than they would under the old system.... The company, which employs thousands in Research Triangle Park, notified workers Wednesday that it will stop making matching payments every two weeks in paychecks. Instead, IBM will make a contribution once a year."
(.biz)

Should You Convert to a Roth IRA Before 2013 Tax Changes?"Taking a traditional IRA funded with pre-tax dollars and converting into a Roth triggers a taxable event. If you wait and convert in 2013, it will affect the determination of whether the Medicare tax applies to the IRA owner's investment income. The converted IRA amount itself is not subject to the 3.8% tax as investment income. However, it is included in compiling the taxpayer's MAGI. Therefore, depending on your circumstances, a Roth conversion in 2013 could increase the IRA owner's MAGI over the specified $200,000/$250,000 thresholds, resulting in the application of the Medicare tax. Converting now avoids this possibility."
(Physicians' Money Digest)

Rhode Island Court Deciding Whether to Hear Union Challenge to State Pension Overhaul"Unions argue the changes to state retirement benefits are unconstitutional and unfair. State leaders insist that without the changes, ever-escalating pension costs would swamp state finances. They say the pension law -- which passed overwhelmingly in 2011 -- was carefully crafted to withstand legal scrutiny."
(The New York Times; free registration required)

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Defined Contribution Plan Issues: The Fiscal Cliff and Beyond (PDF)Fifteen presentation slides outlining possible effects on employee benefit plans of various legislative proposals that would limit plan contributions. Includes consideration of the effects on plan participation of changes in individual income tax rates.
(American Benefits Council and 38 corporations, plan representatives, and employer organizations)

Tail-Risk Hedging: a Sensible Strategy for Defined Benefit Plans?"For defined benefit plan managers, the ultimate tail risk is a 'perfect storm' -- periods such as the tech bubble crisis period from 2000-'02 and the 2008 financial crisis when return-generating assets crashed and investors' 'flight to quality' pushed down yields on government bonds to historical lows. This lethal combination of declining asset prices and increasing present values of liabilities pushed the funded ratios of DB plans from well funded to underfunded.... Against this background, there is a compelling case for a hedge that would provide some protection against possible future tail-risk events."
(Pensions & Investments)

New York City Pension Funds Should Finance Post-Sandy Housing, Comptroller Says"'Now that there is a huge need to rebuild tens of thousands of homes in the city, the use of the city's pension funds as capital to accelerate these projects is going to be vitally necessary, and it can be done in a way that we gain a good return for our pensioners and taxpayers,' [said John Liu, New York City comptroller].... Aside from providing mortgage financing, Mr. Liu said the retirement systems may own buildings as real estate investments. The pension funds may also finance restoration of infrastructure and city properties damaged by the storm[.]"
(Pensions & Investments)

Pension Envy by Employees Not on the Government's Dime"A recent analysis ... of individuals who are near or in retirement showed that those with a public pension are happier in retirement and have higher income than those who don't have a defined-contribution plan.... Among retired and near-retired individuals, people with public pensions enjoyed an average current household income of $65,000, compared with $50,000 for those who don't have a pension. Income replacement rates also are higher for those with pensions, as those people are on track to replace 80% of their income, compared with 71% for those lacking a pension."
(Investment News; free registration required)

Income Annuities Are a Coming Trend"The Insured Retirement Institute (IRI) has reported an interesting increase in the sales of income annuities--i.e. annuities where income payments begin within a year of the date of issue. The total sales, $2.3 billion for the third quarter of 2012, is still very small when compared with total annuity sales for the quarter of $52.9 billion. Nevertheless, such an increase in income annuity sales (3.8%) indicates a trend that flies in the face of conventional wisdom regarding annuitization."
(Morningstar Advisor)

Stable Value Funds Causing Disclosure Dilemma"Stable value funds are not registered investment products under the Investment Company Act of 1940, nor do they need to be registered with the U.S. Securities and Exchange Commission. That's why these funds aren't subject to the rules for the reporting of underlying portfolio holdings and fee disclosures, both of which are required of mutual funds. This (legal) lack of transparency, however, cuts against efforts made by the DOL to promote new cost disclosures concerning the investment options offered to participants in retirement plans."
(Morningstar Advisor)

EPCRS: Exceptions to the Full Correction Requirement"While the Internal Revenue Service consistently requires full correction under EPCRS, there are a few exceptions to full correction worthy of note. These exceptions fit in four categories: small distributions, small overpayments, small excess amounts and lost participants. This is not an exclusive list of exceptions to full corrections but these are the most notable."
(SunGard Relius)

DOL Sues to Recover Losses to ESOP of Rembar Inc."The suit alleges that, in June 2005, First Bankers Trust Services allowed the plan to purchase 100 percent of the company's stock from [the CEO and his] relatives for $15.5 million. An investigation by EBSA determined [in its opinion] that First Bankers Trust Services failed to comply with its duty to understand the valuation report that set the purchase price, identify and question assumptions in the report, and verify that the conclusions in the report were consistent with the company's financial data."
(Employee Benefits Security Administration)

S&P 1500 Plan Sponsors May Be Facing Highest Year-End Pension Deficit Ever"The aggregate deficit in pension plans sponsored by S&P 1500 companies decreased by $12 billion during November, to $607 billion, according to new figures from Mercer . This deficit corresponds to an aggregate funded ratio of 72% as of November 30, 2012. Funded ratios have rebounded slightly above the record low funded ratio of 70% seen at July 31, 2012, at which point the aggregate deficit was $689 billion. However, with December 31 right around the corner, it is likely that a record end of year deficit will be recorded as 2012 closes."
(Mercer)

Pension Funded Status Improves by $33 Billion in November"The interest rates that determine pension funding liabilities climbed back above 4% in November, a welcome development for plan sponsors. If you need an illustration of how substantially interest rates are moving funded status, consider that through November these pensions have exceeded their expected annual return. If they hold onto these gains through December it will be the third such year out of the last four."
(Retirement Town Hall)

November Brings Pension Funded Status Improvement -- Ratio Now at 74%"Pension liabilities of the 100 largest corporate defined benefit pension plans decreased by $28 billion in November while corresponding assets increased by $5 billion, bringing the Milliman 100 Pension Funding Index (PFI) funded status deficit to $466 billion and a 74.0% funded ratio. The November funded ratio still lags the year-end 2011 value of 78.7% with only one month left in 2012 to achieve a neutral change year to year."
(Milliman)

2012 Generational Research: Retirement Readiness"[R]esearch has documented how U.S. employees have generally emerged from the Great Recession with improvements in their day-to-day money management but with a continuing shortfall in their retirement readiness. However, the Great Recession has not left all age groups in the same place.... Those under 30 ... are doing a relatively good job managing their current cash flow but need a longer term perspective that makes planning for retirement more of a top priority. [The 30 to 44] year olds ... earn more income ... but have been hit particularly hard by the Great Recession and are now struggling to balance saving for retirement with the immediate needs of raising a family and paying a mortgage."
(Financial Finesse; free registration for download of full report)

The Relationship Between Pension Funding and Size of the Working Population"Canada is projected to have a 4% decline in working age population as a percent of its total population over the next eight years Japan and Russia are also projected to have a 4% decline. Hong Kong will have a decline of 6% Countries in which the working age population will increase include Pakistan (3%) and 2% in Brazil, India, Indonesia, and Mexico China, the United Kingdom and the United States are expected to see a 2% decline in the working age group as a percentage of total population."
(Mercer)

How Congress Can Help State Pension Reform"[N]o state has yet managed to move its existing work force to a defined-contribution system.... [T]he failure to enact meaningful reforms is not entirely the fault of state politicians or the political pressures they face. Many of the barriers to reform can be removed only by the federal government; Congress therefore has a key role to play in helping states restore their pension systems to stability."
(National Affairs)

Benefits in General; Executive Compensation

[Guidance Overview]

Year-End International Reporting Requirements for Employee Stock Plans"This Commentary highlights some of the principal calendar and year-end reporting requirements for employee stock plans that U.S. companies most commonly encounter when offering these programs to their employees in selected jurisdictions worldwide. A chart summarizing these items [is included]."
(Jones Day)

2012 Nonqualified Deferred Compensation Survey Results (PDF)"Recruiting and retention efforts are becoming even more of a driving consideration in their decision to offer a [nonqualified] plan.... Three-in-five plan sponsors are concerned about their key employees having sufficient income to sustain them in retirement. More than one-third are more concerned than they were five years ago."
(The Principal Financial Group)

Institutional Shareholder Services Issues FAQs on Revised Peer Group Selection Methodology"On December 4, 2012, Institutional Shareholder Services (ISS) released a set of Frequently Asked Questions (FAQs) setting out how it will determine a company's peer group for purposes of conducting its pay-for-performance analysis. The FAQs cover: [1] ISS's new peer group methodology. [2] Communicating updated peer group information to ISS."
(Practical Law Company)

ISS Publishes FAQs on New Peer Group Selection Method"ISS has published a series of frequently asked questions on its new peer group selection method. The FAQs explain the new policies. The new procedures give weight in some circumstances to an issuer's self-selected peers. The FAQS therefore provide issuers with an opportunity to advise ISS of any changes in its peer group for consideration by ISS."
(Dodd-Frank.com, a blog by Leonard, Street and Deinard)

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